Washington (CNN) -- With hours to go until the midnight Friday deadline to keep the government funded, Capitol Hill was waiting for word Thursday morning about a meeting between GOP and Democratic leaders aimed at resolving the latest impasse.
The closed-door Wednesday night meeting among House Speaker John Boehner, Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell, which lasted about an hour, was the first sign of progress after days of stalemate.
There was no immediate sign that a deal was near, but the meeting suggested the two sides might finally work directly toward resolving the dispute.
Failure to pass the appropriations bill by midnight Friday would mean the government lacks funding authority and a partial shutdown would ensue. The White House and Democrats are calling for a short-term spending measure, known as a continuing resolution, to extend government funding past Friday and allow more time for negotiations.
If no resolution is reached, the payroll tax rate on working Americans could also jump at the end of the month.
A Democratic source told CNN that Senate Democrats plan to drop a provision to tax income over $1 million and will offer a new proposal instead.
Republicans oppose the so-called "millionaires tax," and have blocked previous proposals by Senate Democrats to prevent a payroll tax hike.
No further details were immediately available on the new proposal, first reported by CNN, which emerged from a White House meeting between Senate Democratic leaders and President Barack Obama on Wednesday afternoon, the source said.
Obama for months has argued that the wealthy should pay what he terms their fair share of taxes.
A senior administration official told CNN the White House would not have any specific reaction to reports that Obama and Senate Democratic leaders were abandoning the surtax.
But the official, who was not authorized to speak on the record, said, "We've always been open to other pay-fors -- but as the president has said himself a couple of times in the last 10 days -- he won't accept a pay-for that's unbalanced and he won't allow extraneous political issues to get in the way."
White House communications director Dan Pfeiffer said Obama has concerns about provisions reported in the Republican-supported spending bill, including "provisions that would undermine Wall Street reforms, enact extreme social and ideological riders, undercut environmental protections and threaten the foreign policy prerogatives of the president."
"Given the magnitude of the legislation -- providing over $1 trillion in funding -- coupled with the unresolved payroll tax cut and unemployment insurance extension, Congress should pass a short-term continuing resolution as it has seven times already this year so that all parties have an appropriate opportunity to consider and complete all of the critical budget and economic issues ...," Pfeiffer wrote.
Political skullduggery spilled onto the Senate floor Wednesday with Democratic and Republican leaders openly squabbling over the order of votes on the GOP payroll tax-cut plan and the spending measure needed to keep the government funded.
The inability of Senate party leaders to agree on how to proceed, let alone schedule votes, stymied progress on measures that both parties have said they support in concept -- holding down taxes for working Americans and determining government spending for the rest of the fiscal year.
Reid, D-Nevada, accused Republican counterpart McConnell of "living in a world of nonreality" and said the GOP payroll tax cut plan passed Tuesday by the House was "dead on arrival" in the Senate.
McConnell, R-Kentucky, shot back that Democrats wasted weeks of time with political "show votes" intended to bolster Obama's re-election campaign.
The Senate, he said, should vote first on a broad spending agreement reached by congressional negotiators to ensure government funding continues after a previous short-term extension expires at midnight Friday.
"Quit wasting our time here in the Senate scoring points with the shutdown two days away," McConnell said.
Reid and other Senate Democrats responded that McConnell and Republicans want to avoid certain defeat on their payroll tax plan, which includes controversial provisions to speed approval of the Keystone XL oil pipeline from Canada and weaken environmental regulations.
House GOP leaders are considering a move that would try to force a vote on the huge government spending bill, according to two Republican members.
In a closed-door House Republican conference meeting Wednesday, Boehner floated the option of not waiting for Democrats to sign off on a final agreement between the House and Senate on the measure.
Instead, House GOP leaders are discussing combining the spending bills for various government agencies into a single package and having a House vote Friday. They would then send it to the Senate and attempt to force Democrats to vote on it -- or be held responsible for a potential government shutdown.
Rep. Tom Rooney, R-Florida, said leaders have not decided on that course, but are still determining whether they could get 218 Republican votes to pass it -- assuming they are unlikely to get much Democratic support.
Another Florida Republican, Allen West, said he supported the idea of the House moving ahead with its own spending bill package so federal agencies would be funded. "We can't wait," West told CNN.
After the meeting, Boehner insisted that Republican and Democratic negotiators worked out a deal on the government funding bill, but that Senate Democrats are holding action on that measure hostage to negotiations on the payroll tax cut bill.
"It's pretty clear to all of us that President Obama and Sen. Reid want to threaten a government shutdown so they can get leverage on a jobs bill because the United States Senate can't pass one," Boehner said.
Health and Human Services Secretary Kathleen Sebelius sent a letter Wednesday night to employees, citing possible effects of a shutdown.
If funding lapses, she wrote, some employees would be furloughed. The letter was obtained by CNN.
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